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Making sense of rental deposits

Just Property’s Shaun du Bois has some important advice for tenants on the ins and outs of how to protect (and get back) your deposit.

Many tenants worry about the security of the deposit they pay on rental properties. Shaun du Bois of Just Property believes that education is key to their peace of mind.

“There is a lot of mistrust around the question of paying a deposit and getting it back at the end of a lease,” he says. “In my experience, a successful outcome is assured when you have a good rental agent, who clearly explains everything to both landlords and their tenants upfront. He or she should play the role of trusted go-between and make sure both parties understand their responsibilities and what they are committing to when they sign the lease on a property.”

For tenants who are concerned or those looking to rent their first property, Du Bois outlines the process and answers the questions on many tenants’ lips.

The law clearly outlines how deposits should be handled

The rental deposit is normally paid by the tenant to secure a property, once the lease has been signed. Section 5 of the Rental Housing Act of 1999 provides for this. In South Africa, the deposit is usually equivalent to one month’s deposit, but it may be different, depending on the risk appetite and affordability of the contracting parties. The deposit is an amount negotiated and agreed between the landlord and the tenant and there is no legislation that governs what that amount should be.

Of course, the higher the deposit, the better it is for the landlord in terms of the amount he will have at his disposal to repair any damages or defray outstanding utility costs at the termination of the lease. “In the past, the utility bills did not come to a high percentage of the rental. These days we have to contend with Eskom's compounding increases and utilities bills often being as much as eight weeks in arrears. This can leave landlords out of pocket if tenants leave without settling their bills,” du Bois points out. “Under such circumstances, it is obviously advisable that landlords insist on a separate utility deposit that is sufficient to cover at least two months’ average billing.” Landlords can also limit their risk of utility arrears by installing prepaid meters, something du Bois strongly encourages.

So, what happens to your deposit/s once you’ve handed them over?

This is covered by Section 5 (d) of the Rental Housing Act, which states that the landlord must invest the deposit in an interest-bearing account with a recognised financial institution. Any interest earned accrues to the tenant. If the property is managed by an estate agency then the deposit should be protected and invested in terms of the Estate Agency Affairs Act, 1976 (Act No. 112 of 1976), du Bois notes. Tenants can check at any time on where their deposit is invested and what the interest accrued amounts to.

“The repayment of the deposit is where it gets interesting,” says du Bois, “and a number of variables come into play.”

Most importantly, Section 5 states that should the landlord and tenant not have jointly inspected the property before the tenant moves in, and at the termination of the lease, then this is deemed to be an acknowledgement by the landlord that the property is "in a good and proper state of repair". The deposit should be refunded with interest and without deduction to the tenant.

“Private landlords sometimes do not know the requirements of this legislation and often neglect to do an entry or exit inspection. They still think they can retain the deposit to return the property to the condition it was in when the tenant signed the lease. They would be wrong,” du Bois notes.

Assuming that entry and exit inspections have been correctly conducted, du Bois says that the landlord or agent mandated to act on his behalf is required to refund the deposit based on the following scenarios:

If the tenant’s rental payments are up to date and no amounts are owed in terms of the lease. In this case, the landlord or agent must refund the deposit with interest within seven days after the termination of the lease.

Should any damage to the property be noted on the exit inspection, then the landlord or agent must act diligently to repair it, refunding the balance of the deposit within 14 days of restoration.

If the tenant does not attend the outgoing inspection, (and remember, the tenant must be afforded the right to conduct an inspection at a mutually convenient time), then the landlord must within seven days of the termination of the lease note any damages that the tenant may be liable for and deduct such amounts from the tenant's deposit. Should there be a balance owed to the tenant, this must be refunded to the tenant within 21 days of the termination of the lease.

“Remember, tenants may not ask the landlord to use the deposit for the last month’s rent,” du Bois emphasises.

Tenants can smooth the exit process by taking extensive photographs at the ingoing inspection and, when they are preparing to leave, comparing the property to these photographs to ensure it is exactly as it was when the lease was signed, fair wear and tear accepted. “Replace any lost keys and spring-clean thoroughly, ensure the garden looks cared for and the pool is clean. Leave working light bulbs in the light fittings, and toilet paper in the lavatories”.

“Remember, a TV bracket may have been allowed on condition that it is removed, and the walls restored to their original condition. Alternatively, a curtain rail or a satellite dish may be deemed a fixture or structural addition and the tenant may be required to leave it behind. This is why it is essential that tenants discuss anything that may be deemed to change to the property with the landlord or agent before such changes are made, and ensure the agreements are noted in the lease or in writing if these changes occur during the term of the lease.

“Of course, leases differ on their terms but, in most cases, if the tenant has made any changes to the property, they will need to restore the property to its original condition,” says du Bois. “This would include making sure the entire property is spotlessly clean and returning any walls they’ve painted without permission to the colour they were when the lease was signed.” However, as long as the carpets are clean and the walls are in the same condition as when the tenant moved in, the landlord may not use a deposit to repaint or have carpets cleaned for a new tenant unless this was stipulated in the lease agreement. Additionally, landlords may not use the deposit to renovate or fix anything that can be classified as having devalued only through ordinary and reasonable use over time.

Finally, du Bois emphasises that it is very important for tenants to attend the exit inspection and to have proof on hand that they’ve paid all utilities. “All of this might sound like a lot of work,” he says, “but it is the surest way to get your deposit quickly refunded in full.”

For more information on Just Property please visit www.just.property or call (087) 004 0149